National Academies Rehashes Controversies Over RFS

The National Academies this week released a Congressionally mandated study estimating the potential economic and environmental effects of producing the 36 billion gallons of biofuels required under the Renewable Fuel Standard. The conclusions of the report are 1) that cellulosic biofuels are highly unlikely to meet their mandate of 16 billion gallons by 2022 and 2) biofuels overall are unlikely to reduce greenhouse gas emissions by as much as required. Because the report stopped short of making policy recommendations about the future of the RFS – although it does prescribe continued federal investment in advanced biofuel R&D – it provides ammunition for all interest groups to make their own recommendations.

There are two challenges that the National Academies highlighted in drawing their conclusion that cellulosic biofuels would miss the target. The first is that not enough biorefineries are being built or can be built quickly enough to meet the production goals. This is a challenge that has long been recognized by the industry. BIO’s 2009 report, U.S. Economic Impact of Advanced Biofuels Production, charted the rate at which biorefineries and capacity would need to be built to meet the RFS and calculated the capital cost. The rate of construction by 2020 would have to be very rapid, but of course the capital cost would be lower. The National Academies report recognizes that capital formation has been a challenge for building the first biorefineries; but importantly, it states that policy stability is a key prerequisite for attracting sufficient capital.

An adjunct to the challenge of constructing new production capacity, according to the National Academies, is the need for new technology that lowers the cost of cellulosic biofuel production. The report acknowledges the uncertainty around the technology challenge – no one has demonstrated it at commercial scale, so no one is certain whether new technology is needed. The same uncertainty applies to the costs.

The second challenge highlighted by the report is the great difference in cost between the price that farmers would want for growing, harvesting and delivering biomass to biorefineries and the price that biorefineries want to pay for it. The data cited by the National Academies was collected in 2010 and does not look at projected prices in the future when both farmers and biorefineries have achieved scale. There are federal programs – such as the Biomass Crop Assistance Program – designed to help bridge the scale up period between current prices and future prices at scale. The problem with the National Academies report is that it looks at the RFS in a vacuum.

The report reflects a multitude of views and attitudes obviously brought to the process of writing it. For instance, one of the members of the committee that wrote the report is Jerald Schnoor of Iowa State. More than a month before the release of the new report, Dr. Schnoor signaled his “disappointment” that cellulosic biofuels have not grown quickly while corn ethanol has. The report might give political cover to environmental groups that want to yank their previous support for advanced biofuels and the Renewable Fuel Standard. However, some of the leading environmental groups appear to be holding steady in looking for constructive ways to renew progress toward the goal.